Dollar rate slashed by Tk0.25 again

Bankers have decided to reduce the buying and selling rates of the US dollar by Tk0.25. This marks the third such reduction in just over a month.

Effective next Sunday, banks will buy remittance and export proceeds at Tk109.50 per dollar, while selling them for import settlements at Tk110.

Md Afzal Karim, managing director of Sonali Bank and chairman of the Bangladesh Foreign Exchange Dealers' Association (Bafeda), told The Business Standard that the decision was made on Wednesday night at a joint meeting of the Association of Bankers, Bangladesh (ABB) and Bafeda.

This follows a previous reduction of Tk0.25 on 29 November and a more substantial decrease of Tk0.50 on 7 November.

Beyond the officially set buying and selling rates, banks have an informal understanding of offering a maximum incentive of 2.5% from their own funds. This translates to a maximum buying rate of Tk112.24 per dollar. 

However, current market rates are significantly higher, with banks reportedly buying dollars at Tk112.50 or more. This discrepancy raises concerns about the accuracy of central bank data on dollar pricing, which seems to lag behind the actual market.

The meeting addressed concerns about some banks offering inflated remittance rates, reportedly reaching Tk123-124, which is fuelling inflationary pressures. 

Both central bank data and government intelligence reports have highlighted the issue of inflated remittance rates. Previously, disciplinary action has been taken against several banks' treasury heads and now bank CEOs could potentially face punishment, a meeting source said.

At the meeting, the central bank also directed banks to repatriate dollars allegedly transferred through foreign currency (FC) accounts of their offshore banking units (OBUs).

Additionally, banks were instructed to accept dollars in FC accounts without seeking details about the source of funds.

To ease the country's dollar shortage, the central bank has allowed expatriate Bangladeshis and domestic/foreign institutions to open dedicated foreign currency accounts within the offshore banking unit system. The facility offers attractive interest rates, up to 9%, on deposited dollars and pounds, encouraging foreign currency inflows and potentially stabilising the exchange rate.

The managing directors from several banks present at the meeting told TBS that the central bank instructed them to make efforts to repatriate dollars smuggled through FC accounts. The central bank has offered an interest rate of up to 8.60% on such deposits as an incentive.

A deputy governor of the central bank had called on the treasury heads and directed the banks not to ask too many questions to customers depositing dollars into the FC accounts of OBUs. Banks have also been asked to campaign in Malaysia, Singapore, Canada and other major countries where dollars are smuggled to increase dollar deposits in OBU accounts.

Besides, bank officials have been informed that a law will be formulated to protect the dollar depositors of these accounts.

In addition, banks have been instructed to open Resident Foreign Currency Deposit Accounts (RFCD) and deposit foreign currency in cash.